Intel Feeds the Bear

Intel (INTC - Cramer's Take - Stockpickr - Rating) grew its bottom line 51% in the fourth quarter and raised its profit margin to the highest level in two years, but offered a financial forecast that wasn't up to par with Wall Street expectations.

Shares of Intel plunged 14.7%, or $3.34, to $19.35 in extended trading Tuesday.

The Santa Clara, Calif., chipmaker said it earned net income of $2.3 billion, or 38 cents a share, in the three months ended Dec. 29, compared with net income of $1.5 billion, or 26 cents a share, at this time last year.

Intel's EPS included 2.5 cents of restructuring and asset impairment charges relating to its NOR flash memory business, which is due to be spun off into a separate company .

Analysts polled by Thomson Financial were looking for 40 cents a share, excluding the charges.

Intel's top line fell slightly short of Wall Street expectations, growing 10.5% year over year to $10.7 billion. The average analyst expectation called for $10.8 billion in revenue.

Intel blamed the shortfall on its NAND flash memory business, where prices have been under pressure industrywide, and noted that its computing chip businesses all performed as expected.

Intel's digital enterprise group, which includes processors for servers and desktop PCs, saw sales increase 12% year over year to $4.3 billion. Sales of notebook PC processors also increased 12% year over year.

The company said the average selling prices of its microprocessors in the fourth quarter were flat compared to the third quarter.

Thanks to rising chip shipments, and lower production costs resulting from its new generation of manufacturing tools, Intel's gross margin grew to 58%, compared with 52.4% in the third quarter, and 49.6% in the year-ago period.

That gross margin will dip back down to 56%, plus or minus a couple of points in the first quarter, Intel said. And Intel said it expects gross margin for 2008 to be 57%, plus or minus a few points.

Intel's sales forecast seemed particularly lackluster and did little to assuage investor concerns that a slowing economy could pinch PC sales.

The chipmaker projected that sales in the first quarter would range between $9.4 billion and $10 billion. The average analyst expectation called for $10 billion in first-quarter sales with EPS of 34 cents.

Intel's stock closed Tuesday regular session at $22.69, down roughly14% since the start of the year.

 

via